Kerala HC holds 30 November time limit for claiming ITC applies retrospectively from 1 July 2017

This Tax Alert summarizes a recent judgement of the Kerela High Court (HC)¹ on the constitutional validity of Section 16(2)(c) and Section 16(4) of the Central Goods and Services Tax Act, 2017 (CGST Act).

While Section 16(2)(c) restricts input tax credit (ITC) in the hands of the recipient if the tax has not been paid by the supplier to the Government, Section 16(4) prescribes time limit for claiming ITC.

The key observations of the HC are as follows:

• ITC is a conditional entitlement subject to specific conditions and restrictions provided in Sections 16(2) to 16(4). Various HCs²  have upheld the constitutional validity of the above provisions.
  
• The Government in order to resolve bonafide claims of ITC had issued Circulars³ realizing the difficulty in the initial rollout of GST. Petitioners, who could not avail such benefits, may approach the appropriate GST authority within 30 days of the order.
  
• Vide Finance Act, 2022, Section 16(4) was amended to extend the time limit to claim ITC till 30 November of the next financial year. This procedural amendment was aimed to ease taxpayer difficulties and hence, has to be given retrospective effect.
  
• Accordingly, for the period from 1 July 2017 to 30 November 2022, if a person has furnished the return for the month of September till 30 November, their claim should also be considered.
  

Accordingly, HC upheld the constitutional validity of Section 16(2)(c) and 16(4) of CGST Act and concluded that the amendment in Section 16(4) should apply retrospectively.

Comments

• This ruling is likely to benefit taxpayers in contesting ITC denial where the same was claimed after 20 October but before 30 November of the following financial year.
  
• In the past, there are several HC rulings denying ITC where the same was claimed in September’s return, but the said return was filed after the due date. The matter is currently pending before the Supreme Court.
  
• While the HC held that the revised time limit of 30 November applies retrospectively, it is relevant to note that it is restricted only in cases where September’s return is filed till 30 November. Post amendment in section 16(4), credit can be claimed even in the October’s return provided it is filed before 30 November.

^{[1] TS-343-HC(KER)-2024-GST
[2] MANU/BH/1034/2023, MANU/BH/1260/2023 and 2023 SCC Online AP 1476
[3] Circular Nos.183/15/2022-GST dated 27 December 2022 and 193/05/2023-GST dated 17 July 2023TS-293-ITAT-2024(Mum)]}